COEs to soar to $200k by 2025

Singapore Business Review
2-Nov-2015.

More Singaporeans are likely to abandon the notion of driving their own cars, with COE prices predicted to quadruple by 2025. CLSA predicts COE prices will be around $200,000 in ten years, thereby discouraging people from buying their own vehicles.

In light of higher COE prices, CLSA says the government could announce “a major reform to the taxi network in an effort to increase supply, promote affordability and improve service quality.”

The privatisation of the taxi network may then be on the horizon, where each operator will be given “a set fleet and then incentivising and penalising them for kilometres per day travelled.”

“The government aims to increase the supply of taxis to 50,000 (from 28,000 in 2015) post 2025 by issuing more licences. The ultimate goal is to reduce the demand for private vehicles and potentially reduce COE costs,” notes CLSA.

BMI Research agrees and says that rising congestion on roads, higher down-payment requirements, together with rising parking and electronic road pricing charges, may cause some consumers to completely abandon the notion of car ownership, causing dealerships to lose sales. “As the government remains committed to continued investment in public transport, Singaporeans may have a lesser need to own a vehicle in the future.”

ComfortDelGro, one of the largest transport companies in Singapore, seems to prepare itself for this trend.

According to UOB Kay Hian, the group’s gross capital expenditure jumped 74% year-on-year in the second quarter of this year after purchasing over 200 new taxis. Its taxi fleet then grew to almost 17,000 in the first half of 2015. ComfortDelGro is expected to replace 2000-3000 of its taxis annually and has an average taxi age profile of 4.7 years, shorter than a taxi’s useful life span of 7.5 years.